Danaher Corp. (DHR)

Enterprise Value to FCFF (EV/FCFF)

Difficulty: Intermediate

Danaher Corp., FCFF calculation

USD $ in thousands

12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Net earnings	2,650,900	2,492,100	2,553,700	3,357,400	2,598,400
Net noncash charges	1,266,100	911,800	441,100	267,900	1,080,400
Change in operating capital	105,000	73,900	92,700	202,700	79,600
Net cash provided by operating activities	4,022,000	3,477,800	3,087,500	3,828,000	3,758,400
Interest payments, net of tax¹	112,980	109,070	174,900	98,532	88,028
Payments for additions to property, plant and equipment	(655,700)	(619,600)	(589,600)	(633,000)	(597,500)
Proceeds from sales of property, plant and equipment	6,300	32,600	9,800	–	–
Free cash flow to the firm (FCFF)	3,485,580	2,999,870	2,682,600	3,293,532	3,248,928

Item	Description	The company
FCFF	Free cash flow to the firm is the cash flow available to the Danaher Corp.’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.	Danaher Corp.’s FCFF increased from 2016 to 2017 and from 2017 to 2018.

Danaher Corp., interest paid, net of tax calculation

USD $ in thousands

12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Effective Income Tax Rate (EITR)

EITR¹	19.30%	16.10%	17.50%	21.80%	25.40%
Interest Paid, Net of Tax
Interest payments, before tax	140,000	130,000	212,000	126,000	118,000
Less: Interest payments, tax²	27,020	20,930	37,100	27,468	29,972
Interest payments, net of tax	112,980	109,070	174,900	98,532	88,028

2018 Calculations

² Interest payments, tax = Interest payments × EITR
= 140,000 × 19.30% = 27,020

Danaher Corp., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (USD $ in thousands)
Enterprise value (EV)	103,496,679
Free cash flow to the firm (FCFF)	3,485,580
Ratio
EV/FCFF	29.69
Benchmarks
EV/FCFF, Competitors
3M Co.	20.98
General Electric Co.	25.48
Honeywell International Inc.	21.41
EV/FCFF, Sector
General Industrials	17.18
EV/FCFF, Industry
Industrials	22.54

If company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.

Otherwise, if company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

Danaher Corp., historical EV/FCFF calculation, comparison to benchmarks

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Selected Financial Data (USD $ in thousands)
Enterprise value (EV)¹	87,876,644	77,809,788	70,169,467	72,073,174	62,097,433
Free cash flow to the firm (FCFF)²	3,485,580	2,999,870	2,682,600	3,293,532	3,248,928
Ratio
EV/FCFF³	25.21	25.94	26.16	21.88	19.11
Benchmarks
EV/FCFF, Competitors
3M Co.	24.76	28.46	21.40	19.78	20.82
General Electric Co.	27.31	18.48	35.71	42.38	17.37
Honeywell International Inc.	19.22	22.51	21.27	18.68	19.99
EV/FCFF, Sector
General Industrials	17.22	22.13	29.18	25.19	18.53
EV/FCFF, Industry
Industrials	22.69	24.75	23.33	19.95	19.32

2018 Calculations

³ EV/FCFF = EV ÷ FCFF
= 87,876,644 ÷ 3,485,580 = 25.21

Ratio	Description	The company
EV/FCFF	Enterprise value to free cash flow to the firm is whole company valuation indicator.	Danaher Corp.’s EV/FCFF ratio declined from 2016 to 2017 and from 2017 to 2018.